Student Loan Fraud (Part I)

Fraudulent schemes involving government and private student loans are thriving in this currently sluggish economy. The purpose of this two-part essay is to explore the growing problem of student loan fraud.

Financial aid scams are on the rise in the United States during a time when record numbers of first-time freshmen are attending college and nontraditional students are returning to school. Due to the massive increase in the number of online classes, the fine-tuning of technology, and the cloak of anonymity provided by the internet, slick criminals are committing student loan fraud in record numbers.

On top of that, the stakes are high because a truly staggering amount of student loan money is up for grabs. According to Khalfani-Cox (2010), with thousands of colleges and universities potentially eligible to receive federal money, and more than $100 billion in new aid disbursed annually to some 14 million borrowers, the Department of Education "faces a formidable challenge in ensuring that...funds reach the intended recipients," Deputy Inspector General Mary Mitchelson said in a recent report.

Prior to 2005, colleges and universities were disallowed from participating in government student loan programs if more than 50 percent of the school's students were taking online classes. However, this is no longer the case, and the overwhelming majority of schools in the U.S. have numerous online course offerings. However, crooks who pose as students are taking advantage of this relatively new rule change. Amid tough economic times, an increasing number of these students are actually what are known as "Pell-runners"-people who disappear as soon as they receive the proceeds of their Pell grants or student loans (Lewin, 2011).

The 'fake student' scam is also on the rise, and the financial payoff is extremely lucrative if the criminals manage to elude capture by authorities. Trenda Lynn Halton, of Peoria, Ariz., recruited 64 "straw students" to pretend that they enrolled in Rio Salado College in Phoenix in order to get more than half a million dollars worth of Stafford Loans and Pell Grant funds (Khalfani-Cox, 2010). Halton was eventually caught, received a sentence of 41 months in federal prison, must pay more than $500,000 in restitution to the United States Department of Education, and was ordered to complete 100 hours worth of community service.

Professional crooks are not the only ones who scam the system. In fact, some legitimately-enrolled college students perpetrate financial aid fraud and attempt to take their illegal slice of the pie. Such is alleged to be the case with a former Harvard senior, Adam B. Wheeler, who now faces criminal charges for falsifying documents to get into the Ivy League school and roughly $45,000 in scholarships, grants and financial aid, according to The Boston Globe (Khalfani-Cox, 2010).

Student loan fraud is a growing problem during an unfortunate time when millions of real students badly need the money from federal and private sources. However, this essay is has not ended quite yet, because many other fraudulent schemes exist that serve no purpose other than to steal financial aid funds. Stay tuned for the upcoming second part of this two-part essay.

Interesting. A few people in my town were recently charged with a federal crime for doing this. They pretended to enroll in Cappella University took out loans in excess of $200,000. Their names were plasterd over our local newspaper. Embarrassing. It upsets me because I'm getting financial aid and loans and I went about it the right way and these crooks are taking advantage. There are people out there who really need the aid and they can't get it. Glad they were caught.

I am surprised a for-profit institution like Capella actually let the prospective student get a hold of the actual check. Most of the time, from what I have seen in years past, those institutions have the check sent straight to them!

BUT - More sinister is the fact that UoP, Capella, etc are even worth 200k! In my area, that is tuition at Loyola or Tulane! Probably a bit more valuable degree to boot. Even then, this would have had to be done over several semesters. So, something fishy is going on here probably even in the admissions board of the college.

So.. who is ripping who off. If it is any consequence, they will chase after those folks for years. There is no bankruptcy for student loans

So.. who is ripping who off. If it is any consequence, they will chase after those folks for years. There is no bankruptcy for student loans

Bingo!

Federal student loan debt cannot be written off or discharged in bankruptcy. Once a person signs on that dotted line, they've either gotta pay off the loan, keep deferring, or die owing a balance.

Student loan debt used to be discharged in bankruptcy. However, con artists and fraudsters changed all of that through repeated abuses. Back in the 1980s, law students would live lavishly off the proceeds from government student loans, drive luxury cars, and rent upscale apartments. Then they would file for bankruptcy within a year after graduation, and their debts would be wiped clean.

So many law students did this back then that it prompted the rules regarding student loan debt to be changed to prevent the abuse.

What we are seeing is a bubble, similar to the housing bubble of the early 2000s. This is the academia bubble, which will soon burst, as the cost of tuition is going up much faster than the cost of inflation and cannot be sustained.

What we are seeing is a bubble, similar to the housing bubble of the early 2000s. This is the academia bubble, which will soon burst, as the cost of tuition is going up much faster than the cost of inflation and cannot be sustained.

Not to mention, VickyRN, the cost of tuition is not keeping pace in most fields with what the pay rate for these jobs are. I posted on the CNA boards about how folks ran up major (20k to 30k) debt for Medical Assistant programs at for profit colleges. In my area, there are really no jobs for that and from other posters there are some areas do have a need. But still, 20 k for a 15/ hr job? I guess at that point you are just paying so you will not have to work at Walmart or the hospitality business.

Even RN may start to see issues, though fortunately the AAS programs are still fairly affordable for those who want in and can get in and actually bear the rigors of it. I do not know of any for profit institutions that can give you the RN AAS other than LPN bridge programs, at least in my area. It is all cheap community colleges, but they have long wait lists and are very intrusively selective. However, in MS, the starting pay for a RN right out of school is around 18/hr plus any shift diffs. In Louisiana, it is around 20-24/hr. Of course, sign on bonuses are a thing of the past most places. Seems a bit little for all that effort, pain, and struggle I hear from the veterans of NS boot camp.

I hate to double post, but the 100k for a BS or 60k for a AAS might be worth it if you could play the reciprocity game and go to an area where RNs are raking in 40/hr and up just to get past all the selective BS. Yeah, it would hurt. But, I could see some who would want to do it. Even if that 40/hr may be elusive.

My question is, are these places considered amongst the medical community and HR the same way an IT degree from University of Phoenix or ITT tech is considered in IT? Would you be laughed out of an interview?

My question is, are these places considered amongst the medical community and HR the same way an IT degree from University of Phoenix or ITT tech is considered in IT? Would you be laughed out of an interview?

ITT Tech is one of the schools that actually offers an associates degree nursing program in many cities across the U.S.

The school with the $132,000 tuition does not have the most stellar local reputation. In addition, anyone who finances $132k is going to be stuck with a $1,500+ monthly student loan for many years to come.

ITT Tech is one of the schools that actually offers an associates degree nursing program in many cities across the U.S.

The school with the $132,000 tuition does not have the most stellar local reputation. In addition, anyone who finances $132k is going to be stuck with a $1,500+ monthly student loan for many years to come.

There is definitely a trend at the CC...they attend the first 14 days of classes to get their check and then they drop. Parking is where you can actually see it happen. The lots are full the first 2 weeks, then suddenly after checks are disbursed parking isn't an issue. It is used and abused like every other government assistance.